Auto Supplier Venture: Money Diverted Before its Bankruptcy

by Jeffrey McCracken
Detroit Free Press Business Writer

AKRON, OH — One of Michigan’s largest private corporations has taken the extraordinary action of suing the man who founded it, saying he, his family and side businesses owned by them siphoned more than $314 million from the corporation before it declared bankruptcy.

Fraser, Mich.-based Venture Corp., one of the world’s largest auto-plastics makers and a crucial supplier to the Detroit’s automakers, sued its owner — prominent businessman Larry Winget — late Monday in U.S. Bankruptcy Court in Detroit. The lawsuit claims the 63-year-old Winget, his wife, two daughters, son and nephew fraudulently took millions from Venture and paid it to companies owned by them in return for few or no services.

Because Venture is in bankruptcy, the company and its owner are now viewed by the law as two different parties. In effect, Venture is telling the bankruptcy court that Winget took hundreds of millions from Venture over a six-year period and must pay it back so that creditors can get paid and the company will have a more promising future.

In one example cited by the suit, a Barbados insurance company owned by Winget was paid $3.73 million for health-care premiums, but the insurance company never paid Venture back as health-care claims came in. The suit says Venture also sent $10.5 million to a Rochester Hills, Mich., golf course called Wyndgate, which is owned by Winget, and Venture received nothing of “reasonable equivalent value in exchange.”

Winget’s attorneys released a statement on behalf of their client, calling the suit “without merit,” and blamed much of Venture’s struggles on its creditors. The statement said “virtually all” relationships between Venture and Winget’s affiliates were disclosed to creditors.

“The suit is part of the strategy of Venture’s bondholders to make personal attacks on Winget and his family in order to extract value which would otherwise be unavailable to the bondholders because today the value of Venture’s assets is simply not sufficient to pay them,” said the statement from Winget’s lawyer Ralph McKee.

Venture’s in-house lawyer, David Barnes, said the suit was prompted by a seven-month investigation of Venture’s finances. An audit was done by the Troy, Mich., accounting firm of Doeren Mayhew, which specializes in analyzing the finances of bankrupt firms.

“The company, when it’s in bankruptcy, has duties to more than just its owner, Mr. Winget,” said Barnes. “Venture has an obligation to its banks, bondholders and trade creditors to pursue any assets or money owed the company. This action seems appropriate under the circumstances.”

The suit also seeks to force Winget to hand back to Venture the various land, patents and other assets Winget claims as his.

The 91-page suit includes details about checks and wire transfers to Winget and the companies he and his family own. It says this was a “concerted scheme,” to send Venture’s profits to Winget. It claims accurate records were not kept, to prevent “the discovery of the irregularities.”

Joel Applebaum, a lawyer suing Winget on behalf of unpaid creditors, compared the situation to “Adelphia and the Rigas family.” In that case, federal prosecutors in New York charged Adelphia Communications Corp. founder John Rigas and his sons with stealing $252 million from the cable TV giant. The trial is ongoing.

“It’s rare to see this much money taken from a company by a family. It’s a lot like Adelphia. The magnitude of money here, over $300 million, is remarkable,” Applebaum said.

Nancy Mitchell, a Chicago lawyer for Winget, responded: “I believe that statement is typical of out-of-money creditors who employ terrorist tactics to extract value from a company. I also think it’s irresponsible to make such comparisons.”

The Venture-Winget matter is different from Adelphia in that Venture is suing, in civil court, the man who founded it, rather than the government pursuing criminal charges against him.

Some of the world’s largest financial institutions, such as Merrill Lynch, are suing Winget in hopes of getting back the $495 million that Venture owes its bondholders. Merrill Lynch was a large bondholder of Venture, which was a private firm but had public bond debt. Venture also owes about $68 million to its trade creditors, including many small companies in and around Detroit.

Barnes declined to comment on whether any of Winget’s actions were criminal.

“Whether or not any federal agency wants to look at this lawsuit and launch an investigation would be up to that agency,” he said.

Venture employs 13,000 globally. It filed for bankruptcy protection in March 2003. At the time, it said it would pay back creditors and emerge from bankruptcy in late 2003. Instead, it remains in bankruptcy.

Venture posted sales of about $1 billion in 2003 and is Michigan’s 16th-largest privately held company, according to the Free Press Private Reserve report. It posted sales of up to $1.86 billion in recent years, but lost much of its business in Europe due to the insolvency of its German-based division.

Winget was one of five original founders of Venture in the 1970s. He’s owned 100 percent of it since 1987. Venture makes products such as instrument panels and exterior plastic trim for automakers. About 85 percent of its sales are to General Motors Corp., Ford Motor Co. and the Chrysler Group. They have been concerned about Venture’s viability since 2002 and have had restructuring firms inside the company to give them regular updates.

Last month, Venture put itself up for sale, but lawyers said it was unlikely anyone would buy it because many of Venture’s assets are controlled by Winget.

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